Victims are seeing their bank accounts emptied after fraudsters set up fake accounts to take out Wonga loans and use stolen card details to push the debt onto unsuspecting consumers, a This is Money investigation has found.

In a series of cases raising concerns about the payday lender's security checks, the first victims know is when they notice that money has been taken out of their account by Wonga.

When they call their banks to report the crime they are told to contact the payday lender directly, yet those who have come to This is Money for help have typically found it to be slow to help - leaving them missing almost £1,000 or more for long periods.

Wonga: Lender says that fraud only accounts for a small percentage of loans but This is Money has seen repeated cases of scammers getting through.

Banks directing fraud victims to Wonga goes against usual fraud protocol
where the bank would normally refund the money to the customers and then
investigate the situation.

It has also left victims unable to recover the stolen money and exposes their bank accounts to further fraud while they wait.

Wonga says that fraud happens in two ways, either by identity fraud, or when scammers use stolen card details.

It is not exactly clear how fraudsters are getting money out of Wonga, but it seems that one way is for them to take out a loan and have it paid into a bank account which they then delete from the Wonga system.

The fraudster will then enter stolen bank card details, so when Wonga collects the loan repayment it takes it from that account, something that comes as a surprise to victims who have had no connection to the original loan.

It is unclear how fraudsters are getting the loan money out of the system without their whereabouts being detected, but Wonga says it stops many loans before fraud is carried out, reports all cases and co-operates fully with police investigations. We have been unable to find out whether any fraudsters have been collared for the crimes This is Money has seen.

Security checks are supposed to make it impossible for fraudsters to use other people’s card details on the Wonga system, but they are somehow bypassing this to take out loans.

Wonga told This is Money that it complies with the usual standard of security checks required of businesses and that only 0.01 per cent of loans are fraudulent. It also asserted that it is vulnerable to fraud in the same way that any other online business is.

A spokesman from Wonga said: 'Fraud occurs when criminals gain access to someone else’s full debit card details and then manage to bypass both ours, and the banks, advanced security systems.

'We work extremely hard, using the latest systems and specialist teams, to prevent fraud. We take it extremely seriously as an issue and only a tiny fraction of a percent of loans are ever affected by it.'

Wonga took £715 in six payments and then left me stranded

In the past five months This is Money has been contacted by a string of readers who have all suffered the same problem.

Victim: Collette Pendreigh had £700 taken fraudulently out of her account by Wonga

Last week Collette Pendreigh had £700 taken from her account despite never having taken out a loan with Wonga.

The 26-year-old who lives in Cambridge had her card declined in Tesco and logged onto her banking app on her smartphone to check her account.

She found that Wonga had taken six separate payments adding up to nearly £715.

The charity support worker said: ‘I have never had a loan from Wonga in the past and don’t even recall visiting the website never mind providing them with my bank or bank card details. They completely emptied my bank account and exceeded my overdraft limit.’

Collette rang her bank who were unhelpful and suggested that she call Wonga to recoup the money.

She then embarked on an unpleasant hunt to claim back the money. She called Wonga which told her to call the police to get a crime reference number, the police told her to call her bank.

At this point she contacted This is Money who spoke to Wonga about the issue. Wonga refunded her the money, but claimed it had already started to deal with the issue as less than 24 hours had passed since she first contacted them.

Colette's was the fourth case that This is Money has covered in the past three months regarding fraudulent payments being taken from readers' accounts. We have also seen comments and emails from other readers who have been affected by a similar issue.

In May Jonathan Pitts had £1,800 taken from his account by Wonga, he told his bank about it and they refunded the money. A few days later the same amount was taken again and he had an agonising 10-day wait before he was refunded the money after This is Money stepped in. He had never taken a loan out with Wonga before.

A fortnight ago we wrote about Paul who had £750 taken from his account by Wonga, even though he had never taken out a loan. Again he was told to contact Wonga by his bank, met with little help, and eventually asked This is Money to step in and contact the payday lender.

The MP with a file of Wonga complaints

Cap on the cost of credit: Stella Creasy MP for Walthamstow is calling on the government to tighten up regulation on payday lending.

Stella Creasy, MP for Walthamstow, who has called on the Government to increase regulation in the payday loan market, told This is Money that she has received over 20 complaints from people with the same issue.

She said: 'Yet again this company are in the spotlight for all the wrong reasons. There is clearly a problem here and being able to enter another person’s card details on to your account is an invitation for fraud.

'How much more notice does the Government need that legal loan sharks need serious attention.'

Wonga isn’t the only payday lender or online business to be affected by fraud. However, it is a high profile company and many readers have contacted This is Money with a similar issue.

Wonga says that it reports all the cases of fraud to the police and always work with the force closely to make convictions.

But many victims are being left out in the cold by both Wonga and their bank when they try to report the crime. And it seems banks are in the wrong to pass the buck to Wonga, anyway.

How Wonga collects payments

Wonga uses a common repeat
transaction method called a Continuous Payment Authority (CPA) to
collect money from borrowers – which is why it takes repeated small
payments from customers, adding up to the total of the loan.

When
customers take out a Wonga loan they input their bank or card details,
in doing so they agree to the CPA. This then allows Wonga to collect the
money from their account automatically.

CPAs are also used by companies to collect payments for magazine subscriptions and insurance payments.

A spokesperson from the UK Payments Association told This is Money: 'Those affected by fraud should contact their bank to report the fraud, who then should deal with the issue. Victims should not have to approach the business concerned to recover the money.'

'The only reason why a card company may ask a customer to contact the business directly is because of the nature of the transaction – like those used in repeat transactions.'

When a customer signs up to a repeat transaction, similar to those used by payday lenders to collect money owed on debts, there is no trace left with their card company.

Customers may be asked to contact firms directly to cancel the payment - this seems to be happening with some of those who have been victims of this type of fraud.

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